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Implied Conditions and Warranties under the Sale of Goods Act 1930 with reference to the rule of Caveat Emptor

The Sale of Goods Act 1930 (hereinafter the Act) contains various provisions regarding the sale of goods. One such provision is of conditions and warranties. In Section 12 of the Act the meaning of conditions and warranties are given as under-

(1) A stipulation in a contract of sale with reference to goods which are the subject thereof may be a condition or a warranty.

(2) A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated.

(3) A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated.

(4) Whether a stipulation in a contract of sale is a condition or a warranty depends in each case on the construction of the contract. A stipulation may be a condition, though called a warranty in the contract.
But our concern here is with 'Implied Conditions and Warranties'. If a stipulation forms the very basis of the contract, or, as stated in S.12(2) is essential to the main purpose of the contract, it is called a condition. On the other hand, if the stipulation is not essential to the main purpose of the contract, it is called warranty S. 12(3).

Parties may expressly provide any conditions or warranties in their contract. For e.g. for a sale of red saree, to be worn by a woman at a function on a particular day, it is express condition that it should be red saree for a particular day and should reach on time. But is there any other condition? Yes, there can be other conditions also that are not exclusively said by parties but are impliedly understood. In the said illustration, the implied condition can be of a perfect saree, not to be torn, matching with selected piece etc. Let's have a deep look into this provision.

Meaning–Apart from what may be provided by the parties in the contract, certain conditions and warranties as provided under S.14 to 17 are impliedly there in every contract of sale of goods. Thus the stipulation that are implied in a contract of sale of goods corresponding to their nature of being a condition or warranty as according to the nature of contract is called as Implied Conditions and Warranties. They are binding in every contract unless they are inconsistent with any express condition and warranty agreed by the parties.

Implied Conditions:
There are seven implied conditions in a contract of sale of goods. They are –

1.Implied condition as to title – S. 14(a)– In every contract of sale, unless the circumstances are such as to show a different intention, there is an implied condition on the part of the seller that in case of sale, he has a right to sell the goods and in the case of agreement to sell, he will have the right to sell goods at the time when property in them is to pass.

In Rowland v Divall[i], the claimant, a car dealer bought a car from the defendant for £334. He painted the car and put it in his showroom and sold it to a customer for £400. Two months later the car was impounded by the police as it had been stolen. It was then returned to the original owner. Both the claimant and defendant were unaware that the car had been stolen. The claimant returned the £400 to the customer and brought a claim against the defendant under the Sale of Goods Act. It was held that the defendant did not have the right to sell the goods as he did not obtain good title from the thief. Ownership remained with the original owner. The defendant had 2 months use of the car which he did not have to pay for and the claimant was not entitled to any compensation for the work carried out on the car.

If the goods bears labels infringing the trademark of a third party, the seller has no rights to sell them. In Niblett v Confectioners' Material [ii], the claimant purchased 1,000 tins of condensed milk from the defendant. The tins were labelled 'Nissly'. Nestle told the claimant that if they attempted to sell these on, they would apply for an injunction to prevent the sale as the label was very similar to Nestle's labels for their condensed milk. The claimants agreed not to sell them and brought an action against the sellers. It was held that ,the sellers did not have the right to sell the goods and therefore the buyers were entitled to repudiate the contract.

In Butterworth v Kingsway Motors [iii], R was in possession of a car under a hire-purchase contract with a finance company. Before exercising the option to purchase, R sold the car to X, who then sold it to Y. Y sold the car to KM, and KM sold it to B. The finance company recovered the car from B. It was held that at the time KM purported to sell, they were not the owners of the car. B was entitled to recover the whole of the purchase price paid to KM, because there was a total failure of consideration. Thus it was observed that Where a seller having no title to the goods at the time of the sale, subsequently acquires a title, that title feeds the ,that title feeds the defective titles of both the original buyer and the subsequent buyer.

2.Implied Condition in sale by description – S. 15– When the goods are sold by description there is an implied condition that the goods supplied shall correspond with the description. Lord Blackburn inBowes v Shand[iv] stated: If you contract to sell peas, you cannot oblige to take beans.

In Shepherd v Kane[v], A ship was contracted to be sold as "copper fastened vessel" to be taken with all faults, without any allowance for any defects whatsoever. The ship turned to be partially Copper fastened .The court held that that the buyer was entitled to reject the goods.

When a descriptive word or phrase is used in a contract of sale to describe the product it creates an implied condition that the goods will correspond to the description. For example a sale of Seedless Grapes, signifies that the fruit will have no seeds. If it turns that the fruit is with seeds the buyer can reject the goods.

Some situations-
* Where the buyer has not seen the goods and relies on the description given by seller: In Varley v. Whipp[vi], there was a contract for the sale of a second hand reaping machine which the buyer had not seen. The seller described it as a new machine a year before and having cut only 50 to 60 acres. After delivery, the buyer found that the machine was not in accordance with the description given by seller. It was held that the buyer was entitled to reject the machine.

* Where the buyer had seen the goods but relies not on what he had seen but on what was stated to him by the seller: In Nicholson &Venn v Smith Marriot [vii], Table napkins sold at an auction which were said to be authentic property of Charles I, but that turned out to be false. Claimant was entitled to damages for breach of contract, but Hallet J held the claimant could've avoided the contract on the ground of mistake.

* Packing of goods may sometimes be part of the description: In Moore &Co v. Landauver &Co [viii], M sold to L 300 TINS OF Australian Apple packed in cases containing 30 tins. M tendered a substantial portion in case containing 24 tins. It was held that l could reject all the tins as the goods were not packed according to the description given in the contract as the method in which the fruit was packed was an essential part of the description.

3.Implied condition in sale by sample as well as description – S. 15- When the goods are sold by sample as well as description, it is not sufficient that the bulk of goods correspond with the sample if the goods do not correspond with the description.

In Wallis v Pratt[ix], there was a contract for sale of seeds referred to as 'Common English Sainfoin'. However, the seeds supplied to the buyer were of a different quality. The defect also existed in the sample. The discrepancy in quality was discovered only after the seeds were sown. The buyer could recover damages as there was a breach of condition.

Before heading towards the further implied conditions let us know about the Doctrine of Caveat Emptor meaning 'Buyer beware'. This doctrine of caveat emptor is based on the fundamental principle that once a buyer is satisfied with the product's suitability, then he has no subsequent right to reject such product. This doctrine is enshrined through Section 16 of the Act, thus it becomes important to study it.
Sometimes the goods purchased by the buyer may not suit the particular purpose for which the buyer wants them. The question in such case arise is, whether the buyer can reject the goods or he is supposed to take the risk of goods turning out not suitable for the required purpose.

The section provides that as a general rule, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale. It is incorporation of the rule contained in maxim caveat emptor which means buyer beware. According to this rule, the buyer himself should be careful while purchasing the goods and he should himself ascertain that the goods suit his purpose; but if the goods are subsequently found to be unsuitable for the purpose of the buyer, he cannot blame seller for the same.

For e.g. A purchases a horse from B. A needs the horse for riding but he doesn't mention this to B. The horse is not suitable for riding but only for carriage. A can neither reject the horse nor can he claim any compensation.

In Re Andrew Yule & Co. [x], the buyer ordered for hessian cloth without specifying purpose for which he wanted the same. It was in fact needed for packing. Because of its unusual smell, it was unsuitable for the same. It was held that the buyer had no right to reject the cloth and claim damages.

Section 16 of the act incorporates certain exceptions to the rule of caveat emptor which are the next two implied conditions of a contract of sale also.

4.Implied condition as to quality or fitness – S. 16(1) {First exception to caveat emptor}- Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller's skill or judgment, and the goods are of a description which it is in the course of the seller's business to supply (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be reasonably fit for such purpose.

In Priest v Last [xi], B went to S, a chemist and demanded a hot water bottle from him, S gave a bottle to him telling that it was meant for hot water, but not boiling water. after few days while using the bottle B's wife got injured as the bottle burst out, it was found that the bottle was not fit to be used as hot water bottle. The court held that the buyer's purpose was clear when he demanded a bottle for hot water bottle, thus the implied condition as to fitness is not met in this case.

In Frost v Aylesbury Dairy Co [xii], The claimant bought milk from the defendant and the account book supplied to him contained statements on the precautions taken to keep the milk free from germs. The claimant's wife died of typhoid fever contracted from milk supplied by the defendants. It was held that the claimant should be awarded.

Proviso to Section 16 (1)- No implied condition when the sale under patent or trade name:
In Chanter v Hopkins , the buyer's order to the seller said: 'Send me your patent hopper and apparatus to fit up my brewing copper with your smoke consuming furnace'. The seller supplied the buyer the furnace and apparatus asked for but the same was not suitable for the purpose of buyer's brewery. It was held that the seller had supplied what was ordered and he was entitled to recover its price from the buyer.

5.Implied condition of merchantable quality – S. 16(2) {Second exception to caveat emptor}-S. 16 (2) contains another implied condition which is by way of exception to the rule of caveat emptor. It has been noted before in S.15 that when the goods are bought by description, there is an implied condition that the goods supplied shall answer the description. Goods supplied shall be of merchantable quality where –
-the goods are bought by description;
-from a seller who deals in the goods of that description (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be of merchantable quality.

In Grant v Australian Knitting Mills [xiii] Dr Grant purchased two pairs of woollen underwear and two singlets from John Martin & Co. There was nothing to say the underwear should be washed before wearing and Dr Grant did not do so. He suffered a skin irritation within nine hours of first wearing them. It was held that because of such a defect the underwears were not of merchantable quality.

In Shivallingappa v. Balakrishna & Son [xiv],the buyer ordered for the best quality of 'toor dal'. The dal was loaded in rain and by the time it reached the destination, it became damages by moisture. It was held that since the damaged toor dal could not be sold as that of best quality as it was no longer of merchantable quality. The buyer was entitled to claim damages.

Proviso to S.16(2) – Condition negative when the goods examined by the buyer:
Thus the proviso divides defect into two kinds-
# Patent – Patent defects are those which can be found on examination by an ordinary prudence with the exercise of due care and attention.
# Latent – In latent defects, the implied condition of merchantability continues inspite of the examination of the goods by the buyer.

Liability of all natural consequences: In Jackson v Watson [xv], the plaintiff purchased a tin of salmon from defendant. The contents of the tin being poisonous, his wife died. It was held the defendant were liable to pay damages.

Hence, the basic concept of caveat emptor is contained in the section 16 of the Act.

6. Conditions implied by trade usage - S. 16(3)-Sub-Section (3) of section 16 gives statutory force to conditions implied by the usage of a particular trade. It says: "An implied warranty or condition as to the quality or fitness for the particular purpose may be annexed by the usage of trade." In case of Peter Darlington Partners Ltd v Gosho Co Ltd [xvi], where a contract for the sale of canary seed was held subject to the custom of the trade that for impurities in the seed, the buyer would get a rebate on the price, but would not reject the goods.

7. Implied condition in a sale by sample – S. 17– According to S. 17 (1) - A contract of sale is a contract for sale by sample where there is a term in the contract, express or implied, to that effect. The purpose of a sample is to present to the eyes the real meaning and intention of the parties with regard to the subject matter of the contract which owing to the imperfection of language, it may be difficult or impossible to express in words. According to S. 17 (2)- In the case of a contract for sale by sample there is an implied condition-
(a) that the bulk shall correspond with the sample in quality;
(b) that the buyer shall have a reasonable opportunity of comparing the bulk with the sample;
(c) that the goods shall be free from any defect, rendering them unmerchantable, which would not be apparent on reasonable examination of the sample.

In Godley v Perry [xvii], a retailer purchased from a wholesaler a number of toy catapults in a sale by sample. The retailer sold one of those catapults to a boy and when the boy tried to play with it, it broke into pieces because of manufacturing defect. The retailer was held bound to pay compensation to the boy and in his turn he sued the wholesaler for indemnity. It was found that the retailer had done reasonable examination on his part, thus wholesaler had to indemnify him.

Implied Warranties:
1.Implied warranty of quiet possession –
S. 14 (b)-In a contract of sale unless the circumstances of the case show different intention, there is an implied warranty that the buyer shall have and enjoy possession of goods.

2.Implied warranty against encumbrances- S. 14(c)-
There is an implied warranty that the goods sold shall be free from any charge or encumbrances in favour of any third party. If there is a charge or encumbrance on the goods sold and the buyer has to discharge the same, he is entitled to get compensation for the same from the seller. If the charge or encumbrance of the goods is known to the buyer at the time of the contract of sale, he becomes bound by the same sand does not have any right to claim compensation for discharging the same.

Exclusion of implied terms and conditions- S. 62-
Exclusion of implied terms and conditions.-Where any right, duty or liability would arise under a contract of sale by implication of law, it may be negatived or varied by express agreement or by the course of dealing between the parties, or by usage, if the usage is such as to bind both parties to the contract.

Conclusion–As regards conditions and warranties , section 16(4) lays down that an express warranty or condition does not negative a warranty or condition implied by this Act unless inconsistent therewith. That means that when the parties expressly agree to such stipulation and the same are inconsistent with the implied conditions and warranties, the express conditions and warranties will prevail and the implied ones in S. 14 to 17 will be negative.

End notes-
[i](1923)2 KB 500
[ii](1921) 3 KB 387 Court of Appeal
[iii](1954) 1 WLR 1286
[iv](1877) 2 App Case 455
[v](1821)5b&Ald.240
[vi](1900) QB 513
[vii](1947)177 LT189
[viii](1921 )2 KB 519
[ix](1910) 2 KB 1003
[x]AIR 1932 Cal 879
[xi](1903)2K.B.148
[xii](1905)1 KB 608
[xiii](1933) 50 CLR 387
[xiv]AIR 1962 Madras 426
[xv]1909
[xvi](1964) 1 Lloyd's Rep. 149
[xvii](1960)1 WLR 9
Book referred – Bangia, R.K. 'Contract II', (2017), Allahabad Law Agency, Faridabad

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